Real Estate Forum - September 2011

INDUSTRIAL LEASE, SALE TRANSACTIONS ON RISE

In the second quarter of 2011, Orange County’s industrial market posted nearly 1. 1 million square feet of positive absorption—the highest figure since the fourth quarter of 2005,
according to a Q2 report from Voit Real Estate Services. “Over the past five quarters, from Q2
2010 through Q2 2011, the Orange County industrial market has posted a total of almost 3. 3
million square feet,” says Jerry Holdner, vice president of research at Voit, in the report. “This
is even greater than the previous positive streak during the peak of the market from Q4 2006
through Q4 2007, which totaled only 2. 3 million square feet.”
Irvine-based 360 Commercial Partners points out that Orange County industrial leasing
activity is on the rise. Underscoring this trend, according to 360 Commercial Partners, is
a 21,000-square-foot lease of an Irvine industrial building for Iris Technology, the premier
integrator of reliable tactical power systems for the military. Steve Wagner, associate director
of the industrial advisory group, represented Irvine Technology in the deal.

“The Orange County industrial market is heating up,” explains Zach Niles, director of the
firm’s industrial advisory group. “Tenants are motivated to lock in current low lease rates
before they increase.”
In addition, Niles points out that “there have been recent sales transactions that demon-
strate the increasing motivation of today’s industrial occupiers to take advantage of market-
bottom pricing, favorable interest rates and 10%-down SBA financing. This trend will continue
as occupiers seek to expand capacity and recognize that now is the time to buy.”
A few recent transactions that illustrate Niles’ point are the sales of a 32,000-square-foot
building in Brea; a 14,600-foot building in Yorba Linda; and a 45,500-square-foot facility in
Fullerton. Together, the deals represent more than 92,000 square feet and nearly $9.5 million.

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vides a good environment to retain and
attract employees.’ They’ve been through
the worst of it and now want to position
the company to grow.”
For instance, PIMCO signed a lease
for 300,000-plus square feet in Newport
Center at a rent double what was avail-
able in the airport area. The answer, says
Carnahan is, “They wanted to be in
Newport Center. They wanted to control
their environment so they can attract
and retain talent along with the ameni-
ties that will be built within their build-
ing, plus enjoy the world-class retail,
restaurants, hotels and housing in
Newport Beach.”
So what does the next large tenant
do? Says Carnahan: “Between now and
2012, you’re going to see a pre-lease deal
done for 60,000 square feet to 100,000
square feet or more at Hines’ California
Green or at LBA Realty’s Park Place proj-
ects. It’s because, for the ‘two-floor-plus
tenant,’ there really is a limited number
of best-in-class office buildings that can
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